Lactose led the gains last Tuesday, up 10.6 percent, after gaining 4.6 percent last time. Whole milk powder was next, up 4.9 percent, following a 3.2 percent rise. Anhydrous milkfat was up 2.9 percent, up 4.4 percent last time. Rennet casein was up 2.3 percent. Cheddar cheese was up 2.2 percent, after an 11 percent jump Nov. 15. Butter was up 1.7 percent, after a 1.1 percent gain, and skim milk powder was up 1.4 percent, following a 9.8 percent boost last time.
FC Stone equated the average GDT butter price to $1.9997 per pound U.S. CME butter closed last Friday at $2.0650 per pound. GDT Cheddar cheese equated to about $1.7021 per pound U.S. and compares to last Friday’s CME block Cheddar at $1.71. GDT skim milk powder was at $1.1657 per pound U.S. and whole milk powder averaged $1.6296 per pound U.S. CME Grade A nonfat dry milk closed last Friday at 97¼ cents per pound.
The Dec. 2 Dairy and Food Market Analyst (DFMA) reports that Chinese buyers and traders are reportedly active in the market and «several contacts in the whey and milk powder business are selling products into that country.»
DFMA says data are scarce, but estimates suggest the Chinese milk supply has declined materially. «The Foreign Ag Service estimates 2016 Chinese milk output will close the year down 4.9 percent to 79 billion pounds, down 4.1 billion pounds. Projections point to another 2 percent decline in 2017, or 1.6 billion pounds.»
«Rabobank has pegged China’s milk output down about 2.2 percent this year (1.8 billion pounds),» according to the DFMA, and «This, after most believed milk powder inventories had normalized in the country earlier this year.»
«October Chinese imports were mixed, according to the hard data. Imports of whole milk powder were down 12 percent or 2.9 million pounds, versus one year ago and imports of butterfat were down 19 percent, or 2.2 million pounds. Imports increased for other products including skim milk powder, up 14 percent YoY, or 2.5 million pounds, cheese, up 39 percent, or 4.9 million pounds. Whey was up 9 percent, or 6.8 million pounds. Infant formula sales to China were also higher, up 31 percent, 9.9 million pounds,» the DFMA reports.
The Agriculture Department again lowered its milk production forecasts for 2016 and 2017 from last month in its latest World Agricultural Supply and Demand Estimates report «as slower growth in cow numbers more than offset slightly higher growth in milk per cow.»
2016 production and marketings were projected at 212.4 and 211.5 billion pounds, respectively, down 100 million pounds from last month’s report on production. If realized, 2016 production would be up 3.8 billion pounds, or 1.8 percent, from 2015.
2017 production and marketings were projected at 216.8 and 215.9 billion pounds, respectively, down 200 million pounds on production and down 100 million pounds on marketings from last month. If realized, 2017 production would be up 4.4 billion pounds, or 2.1 percent, from 2016.
Higher forecast cheese and butter prices will result in higher Class III and Class IV milk prices for 2016, says USDA. Class III and IV prices were forecast higher for 2017 on higher component product prices. I’ll have more details next week.
Cheese Prices Decline
Twas three weeks before Christmas and cash dairy prices headed lower as traders absorbed last Tuesday’s GDT, the October Dairy Products report, and were anticipating USDA’s latest milk production and milk price projections.
The Cheddar blocks closed that Friday at $1.71 per pound, down a dime on the week, down 20 cents in the previous three weeks, but still 26½ cents above a year ago. The barrels finished at $1.5775, down 3¾ cents on the week, 15½ cents above a year ago, and a still too high 13¼ cents below the blocks. Sixteen cars of block made their way to the market of last resort and 20 of barrel.
Prices are under pressure, according to FC Stone, but with «solid buy side interest.» Dairy Market News reported that Midwest cheese production is active and manufacturers report milk volumes are generally adequate to meet most processing needs. A few processors are finding a spot load here and there, but not at the discounted prices seen during the Thanksgiving holiday weekend. Cheesemakers are in the final push to get orders out the door and on store shelves before the holidays. Orders, especially for retail, are strong. Orders for food service and deli are a little lighter. Contacts expect the brisk sales to subside somewhat over the next few weeks «due to the passing holiday season.»
«With milk in good balance with processing needs, Western cheese makers are actively producing and filling remaining orders,» said DMN. «Retail demand has been strong, but industry contacts expect some of this demand to wane as the window for shipping holiday orders pass. Cheese demand from food service are also seeing good strength, especially for mozzarella and other cheese for pizzas. Cheese stocks are comfortable to tight for fresh blocks, but remain longer for older cheese and cheese used for processing.»
Spot butter keeps itself in the spot light, reversing four weeks of gains, and closing last Friday at $2.0650 per pound, down 12 cents on the week, and 13½ cents below a year ago when it plunged 70¼ cents to $2.20. Fifteen cars exchanged hands on the week at the CME.
DMN reports that most Central region butter makers are «wrapping up production related to the year-end holiday season. Some are still buying a few spot loads of cream. Churns are running at full capacity but production rates are expected to steadily decrease as the year-end holiday approaches. Bulk stocks continue declining in most processing facilities.»
Western butter retail orders are «still strong, but industry contacts expect the demand to slow in the next two weeks.»
Spot Grade A nonfat dry milk closed last Friday at 97¼ cents per pound, down 3½ cents on the week but 22 cents above a year ago, with 13 cars sold.
The switch to electronic trading of powder has been delayed for a month due to a snafu that reportedly could have jeopardized the integrity of the market. The decade’s old open outcry by traders on the phone will remain for another month but will eventually end for butter and cheese as well as powder.
Improving Margins
Dairy margins continued to improve over the second half of November following higher milk prices with feed costs holding relatively steady, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
«Spot margins in fourth quarter are now at the 85th percentile of the past 10 years, First quarter margins have breached the 90th percentile, and second quarter is close to that threshold,» said the MW. «Forward margins into third quarter 2017 and beyond are also at or above the 80th percentile of the past 10 years. Milk prices are being supported by both domestic and international factors. Recent milk production data from Oceania and Europe reflect growing year-over-year losses in milk output, which are supporting global markets,» the MW states.
«USDA’s latest Cold Storage report reflected a large month-over-month decline in butter stocks with cheese stocks also showing a seasonal decline in October,» according to the MW, but are still above year ago levels. «Feed costs held relatively steady the past two weeks,» the MW states. «Export demand remains strong for corn, although the market will face headwinds from a number of factors, including South American production this spring, recent strength in the U.S. dollar and uncertainty regarding Trump trade policies.»
The Agriculture Department’s latest National Milk Cost of Production report shows October’s total milk production costs were up slightly from the previous month but remain below a year ago.
Total feed costs averaged $10.66 per hundredweight, down 11 cents from August, up 2 cents from September, and $1.17 below October 2015. Purchased feed costs, at $5.94 per hundredweight, were down 18 cents from August, down 7 cents from September, and 57 cents below October 2015.
Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $22.65 per hundredweight, were up 19 cents from August, up 12 cents from September, but $1.23 below a year ago. Feed costs made up 47.1 percent of total costs in October, down from 47.2 percent the month before and down from 49.5 percent a year ago.
Source: Farmers-exchange
Link: http://www.farmers-exchange.net/detailPage.aspx?articleID=16432
